1) It forces dealerships to price things locally and in competition with other dealerships, instead of based on the manufacturers' global strategies. Dick pricing moves are therefore local rather than global, prices aren't fixed everywhere across the country, sales actually happen. Also, a third-party dealership is more likely to want to sell you a used car. Manufacturer owned dealerships have a huge incentive to push new ones. If third-party dealerships had to compete with first-party ones, they would all get priced out of the new car market very quickly and likely go out of business, and then the used car market would suck.
Also, theoretically anyway, it should protect some smaller manufacturers. If a big manufacturer had the infrastructure to do direct sales to everyone, but a smaller manufacturer had worse infrastructure and had to go through dealerships, then the big manufacturer would take its lack of a middleman and price the smaller one out of business. The market doesn't seem to be working like that right now though.
Can't really answer 2).